Mitsubishi HC Capital Asia Pacific Pte Ltd v Fernandez LLC and another

• Jurisdiction: Singapore
• Judge: Vince Gui
• Judgment Date: 30 July 2024
• Neutral Citation: [2024] SGDC 186
• Court: District Court (Singapore)
• Docket Number: District Court Suit No. 457 of 2024, District Court Summons No. 888 of 2024
• Hearing Date: 05 July 2024
• Citation: [2024] SGDC 186
• Year: 2024
• Plaintiff Counsel: Yip Shee Yin (Ascentsia Law Corporation)
• Defendant Counsel: Mohamed Arshad Bin Mohamed Tahir (Fernandez LLC)
• Published date: 06 August 2024

Deputy Registrar Vince Gui:Introduction

A financial lease allows companies to use expensive assets without having to purchase them. The lease agreement typically entails the lessee selecting an asset that they require which the lessor, usually a finance company, would then purchase and lease to the lessee for a fixed term.

The 1st Defendant, a Singapore registered law practice, signed a financial lease to acquire the use of various IT equipment. The 2nd Defendant, Ganesh Karuppiah@Patrick Fernandez, who is an advocate and solicitor and the director of the 1st Defendant, undertook to be the guarantor for the 1st Defendant. Two months into the lease, the Defendants defaulted in paying the monthly rent.

The Claimant, the finance company that leased the equipment to them, brought this action to recover the outstanding contractual sums and applied for summary judgment. The Defendants argued that the IT equipment was defective, and that the Claimant failed to mitigate its damages. After hearing parties, I concluded that the claimed defences were not properly pleaded and substantiated. While I could have granted summary judgment, I ordered the Defendants to furnish security for the full claim sum within 14 days if they wish to defend the action.

The Defendants have appealed my decision. In light of the appeal, I now set out my grounds of decision in greater detail.

Background facts

Pursuant to a lease agreement dated 17 October 2023, the 1st Defendant leased the following IT equipment from the Claimant (the “Lease Agreement”):One (1) unit of Dell Poweredge R710 for Data Server;One (1) unit of Dell Poweredge R710 for Application Server;One (1) unit of D-Link DGS 1016D 16-Port Network Switch;One (1) unit of APC Smart UPS Backup Power SupplyOne (1) unit of Rackmount Firewall with Software Router 8 Ports with Inter CPU RFSense / OPN Sense; andOne (1) unit of Tower Server Rack.I will refer to them collectively as the “IT Equipment”.

Though the IT Equipment were leased by the Claimant, they did not originate from the Claimant. The Claimant was a finance company that indirectly extended credit to the 1st Defendant by securing the IT Equipment using its funds and leasing them to the 1st Defendant in exchange for monthly rents.

The 1st Defendant paid the monthly rent of $3,069.31 for the first two months. It defaulted on payment from December 2023 onwards. The Claimant brought this action to recover the outstanding rental arrears from December 2023 onwards. The claim includes the unpaid rent for the remaining lease period, costs and expenses which became due and payable upon the termination of the Lease Agreement following a default on the part of the 1st Defendant. The lease period was 36 months. A breakdown of the claim sum as of 20 March 2024 is as follows:¹

Item	Amount ($)
Rental in Arrears	13,351.49
Outstanding Future Rent	92,079.30
Overdue Interests	240.04
Administrative Charges (inclusive of GST)	65.00
Legal Costs	174.40
Total	105,910.23

The Claimant also sued the 2nd Defendant who undertook to guarantee the 1st Defendant’s payment of “all sums due” under the Lease Agreement (clause 21.1).

Parties’ pleadings and submissions

The Claimant’s case was simply that the 1st Defendant breached the Lease Agreement, and such breach entitled the Claimant to sue for the sum of $105,910.23.

The Defendants pleaded that:the IT Equipment were “not in a good working condition”. They pleaded that “despite repeated complaints, the Claimants [sic] has failed/refused/neglected to repair and/or replace” them.Where the damage results from the “negligence of a person concerned in the manufacture or distribution of the goods, liability for the loss or damage cannot be excluded or restricted” pursuant to section 5 of the Unfair Contract Terms Act 1977 (the “UCTA”).The Claimant was itself “in breach of contract”.The Claimant cannot “render a contractual performance substantially different from that which was reasonably expected of them” pursuant to section 3(2)(b)(i) of the UCTA.The Claimant did not make any effort to fix an appointment to repossess the IT Equipment.

The Defendants also brought a counterclaim for the rent paid in October and November 2023 totalling $6,269.70.

In their reply affidavit filed to resist the summary judgment application, the Defendants further mentioned that the Claimant failed to mitigate their losses. The Defendants further asserted that the Claimant was fully aware that the IT Equipment was defective and dumped them on the Defendants.

Applicable legal principles

The law on summary judgment applications is well-settled. The purpose of such applications is to enable claimants to obtain judgment without trial against defendants who are unable to set up a bona fide defence. In this regard, the claimant must first show that it has a prima facie case. Once that is shown, the tactical burden shifts to the defendant to establish that there is a fair or reasonable probability that it has a real or bona fide defence. To do that, the defendant must provide evidence to rebut the inference that would otherwise be drawn from the claimant’s evidence. The defendant is required to adduce all such evidence in its affidavit (O 9 r 17(4) of the Rules of Court 2021).

The court will not grant permission to defend if the defendant only provides mere assertions which were equivocal, or lacking in precision, or are inconsistent with undisputed contemporary documents or other statements or are inherently improbable (M2B World Asia Pacific Pte Ltd v Matsumura Akihiko[2015] 1 SLR 325). The defendant must adduce some evidence, direct or indirect, to support the bare assertions made (Calvin Klein, Inc v HS International Pte Ltd[2016] 5 SLR 1183 at [45] and [76]). The defendant’s position must also be articulated with “sufficient particularity” (B2C2 Ltd v Quoine Pte Ltd [2018] 4 SLR 1 at [5]).

In a summary judgment application, the defendant stands or falls on its pleaded case. As the Court of Appeal held in Olivine Capital Pte Ltd and another v Chia Chin Yan and another matter[2014] 2 SLR 1371, if a defendant is not bound by his pleadings, it could lead to an absurd situation. It would mean that a defendant could succeed in resisting summary judgment proceedings based on an unpleaded defence. And if an amendment to the defence is subsequently disallowed, the defendant would not be able to rely on the unpleaded defence at trial which would mean that he would have no arguable defence (at [41]). Allowing unpleaded defences to prevail would effectively frustrate the purpose of summary judgments which was intended for the expeditious resolution of cases that do not require a full-blown trial.

Instead of granting summary judgment, the Court also has the discretion to grant conditional leave to defend (Akfel Commodities Turkey Holding Anonim Sirketi v Townsend, Adam[2019] 2 SLR 412 at [45]). It has been said that a condition is appropriate when the overall impression is that some demonstration of commitment on the part of the defendant to the claimed defence is called for (Abdul Salam Asanaru Pillai v Nomanbhoy & Sons Pte Ltd[2007] 2 SLR(R) 856 at [44]).

Decision

It is undisputed that the Defendants defaulted on the monthly rent from December 2023 onwards. Pursuant to clauses 7 and 8 of the Lease Agreement, such default terminated the Lease Agreement and entitled the Claimant to claim the unpaid rent for the entire lease period, costs, and expenses on demand. The onus is on the Defendants to show that there is a fair or reasonable probability that they have a real or bona fide defence.

Two main allegations were raised by the Defendants in this application. First, they alleged that the IT Equipment were defective and thus the Defendants were not liable to pay, pursuant to the Lease Agreement read with the UCTA. Second, they alleged that the Claimants failed to mitigate damages.

Allegation of defects

I found no merit in the allegation of defects. The Defendants’ pleaded case was weak and deficient. Apart from a bare assertion that the IT Equipment was “not in a good working condition”, the Defence disclosed no particulars as to what the defects were. The Defence also did not disclose when exactly did the defects arise.

The allegation also lacked evidential foundation. The Defendants’ affidavit repeated the same bare assertion that the IT Equipment were “defective” without disclosing evidence of what the defects were. Not an iota of evidence such as a technician report or even a photograph of the defects was exhibited. As I would elaborate below, the Lease Agreement placed the onus on the 1st Defendant (not the Claimant) to repair any defect that might surface. That being the case, it was curious why the 1st Defendant did not engage technician(s) to investigate the defects and attempt to fix them. All the Defendants did was throw bare assertions at the Claimant.

Indeed, if there were indeed defects, one would have expected the Defendants to raise them much earlier, and not raise them only in these proceedings. The Defendants’ allegation that they had complained about the defects was yet another bare assertion that stood at odds with the state of the evidence. No evidence was adduced to prove this assertion. The assertion that the goods were defective becomes even more unbelievable considering the Claimants had issued multiple letters of demand dating as far back as 22 December 2023 to the Defendants prior to commencing this action.² The Defendants had months to investigate and detail the alleged defects. It is curious why the Defendants did not reply to refute the demand by reason of the defects if they truly believed that to be a valid reason for not paying rent. It should be borne in mind that the Defendants were not an...